Real Declines to Three-Year Low as Mantega Says Slump Is Normal

Brazil’s real dropped to a three-
year low as Finance Minister Guido Mantega said the currency was
on a “normal trajectory,” encouraging speculation that the
central bank will let it stay weak.

The currency depreciated 0.3 percent to 2.1045 per dollar
at the close in Sao Paulo, the weakest level since May 2009. The
real was the biggest loser today among the 16 most-traded
currencies tracked by Bloomberg. Swap rates on the contract due
in January 2015 dropped one basis point, or 0.01 percentage
point, to 8.03 percent.

“Mantega’s comments could still make room for the dollar
to gain again,” Luciano Rostagno, the chief strategist at Banco
WestLB do Brasil SA in Sao Paulo, said in a telephone interview.

Policy makers are prepared to intervene in the foreign-
exchange market at the beginning of next year to improve
liquidity if necessary, central bank President Alexandre Tombini
said at a congressional hearing in Brasilia today. Brazil has no
set band for the currency, he added.

The central bank has sold reverse currency swaps since
August to keep the real weaker than 2 per dollar and bolster
exports. It sold $1.4 billion of contracts Oct. 25, $1.6 billion
Oct. 23, $1.3 billion Oct. 5, $5.7 billion Sept. 12 through
Sept. 17 and $350 million Aug. 21.

‘Selfish’ Policies

Brazil will keep doing whatever is necessary to stop
“selfish” monetary policies of some developed nations from
hurting its economy by driving up the real, Mantega said at an
International Monetary Fund meeting in Tokyo last month.

The real has lost 3.5 percent this month as European debt
turmoil and U.S. budget wrangling boost demand for a refuge in
the dollar.

The central bank stepped in to curb the real’s losses by
auctioning currency swaps in May and June as European sovereign-
debt turmoil drove it to what was then a three-year low. A
strong U.S. currency hurts Brazilian companies whose expenses
are mostly in dollars.

Consumer prices rose 0.54 percent in the month through mid-
November after a prior 0.65 percent increase, the national
statistics agency reported today. The median forecast of
analysts surveyed by Bloomberg was for 0.51 percent advance.
Annual inflation accelerated to 5.64 percent from 5.56 percent,
above the central bank’s target of 4.5 percent.

Brazil’s unemployment rate fell to 5.3 percent in October
from 5.4 percent in the previous month, matching the median
projection of economists surveyed by Bloomberg.